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China local debt under control, though some problems: finance minister

Chinese Minister of Finance Lou Jiwei smiles before the G20 finance ministers and central bank governors family photo during 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 19, 2013. REUTERS/Yuri Gripas

BEIJING (Reuters) - China's local government debt is under control but there are relatively big problems in some areas, Finance Minister Lou Jiwei said in comments published on Wednesday, the latest comments on an issue that has raised concern among investors.

China's local government debt is among the biggest threats to its economy as the credit mostly funded the building of public infrastructure, which yield low financial returns. Poor government disclosure on debt levels have further aggravated concerns about the true size of China's bad debt risks.

"The basic size of local government debt is under control and the pace of increase is slowing. But problems are relatively big income areas," Lou said in an interview with the official Xinhua news agency.

"We are strengthening our communications with some local governments while the National Audit Office is conducting a new round of debt auditing," he said.

The office said in July it would conduct an audit of all government debt at the request of the cabinet, underlining concern over rising debt levels in the world's second-biggest economy.

Lou's remarks echoed earlier comments by President Xi Jinping, who said during an official visit to central Asian countries that the government is able to deal with problems of local debt.

Lou also expects growth in central government revenues to pick up in the coming months in line with economic recovery.

China's fiscal revenues in July rose 11 percent from a year ago, slowing a touch from June's 12 percent rise, government data showed earlier.

The government aims to complete reforms to replace a business tax with value-added tax by 2015, which will result in a tax cut of hundreds of billions of yuan, he added.

The government has expanded the tax reform in selected services sectors nationwide from August 1.

(Reporting by China Economics Team; Editing by Jacqueline Wong)